Data analytics to play key role in fighting fraud
Data will be one of the keys to unlocking future technological developments in the fight against financial crimes, according to Colin Bell, HSBC’s group head of Financial Crime Risk, told Gulf News in an interview.
Banks already hold vast amounts of data, but that will only increase. Good data architecture will be critical to allowing a bank to make full use of new technologies like Artificial Intelligence (AI) and blockchain. Increasingly, smart data analytics are going to become standard and they will form the core of the financial crime unit within a financial institution. They will enable far more precision about identifying customers or transactions that are of concern. The analytics unit will be generating leads and deploying predictive tools to tackle financial crime.
“The use of data, particularly customer data, is tightly regulated in most jurisdictions,” Bell said. “To gain the full benefit from the data that we hold, there will need to be international agreements about the circumstances in which data can be shared within the bank, with other banks and with law enforcement/regulators.”
Regulators
Tackling financial crime requires cooperation between regulators, banks, law enforcement and policymakers. All of them will have to keep pace with new risks related to financial crime and also the technology being developed to tackle those risks.
“HSBC is a big proponent of what are called public-private partnerships and in fact we are the only bank that is a member of all of those that have so far been established — in the UK, the US, Hong Kong, Singapore, Australia and Canada. These partnerships enable banks, regulators and law enforcement to share information between each other,” said Bell.
Sharing of information helps those involved to join the dots and target their efforts much more precisely — because criminals aren’t likely to rely on one institution when they move funds around the financial system. Of course there are differences between what is possible in different countries — but there is already evidence to show that public-private partnerships are working.
In the UK for example, the Joint Money Laundering Intelligence Taskforce (JMLIT) has already contributed to the arrest of 63 individuals and millions of pounds being seized.
“We have seen examples of this working in the Middle East region as well. I know that both the UAE and Oman have started to consider more formal partnerships and I welcome this, because of the benefits that they can provide,” he said.
The fight against financial crime is an expensive affair. There is a need for global cooperation to fight financial crimes that will help institutions. There are already some common international standards such as those set out by the Financial Action Taskforce (FATF). HSBC is a member of the Wolfsberg Group, an association of 13 global banks that aims to develop financial services industry standards for Know Your Customer (KYC), Anti-Money Laundering (AML) and Counter Terrorist Financing.
“Differences in the way that countries permit the use of data make it difficult to develop global platforms. We also have to recognise that our customers and regulators will have views about the way that data can or should be shared. We need to be open and transparent about the opportunities and challenges, and bring them with us on an evidence-based journey about the benefits of this approach to them and to society,” Bell said.
“While compliance forms an important part of fighting financial crime, it alone is not enough to protect institutions. Simply complying with existing rules will never be enough to meet the challenges posed by financial crime. Criminals don’t stand still and the financial services sector is changing at a faster rate than ever before as we see new entrants with new business models,” he added.